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Aluminum Co. of America v. Aetna Casualty & Surety Co.5/4/2000
dded to the insurance policy Alcoa drafted were part of the insurance contract. That trial lasted three weeks. The jury returned a complete verdict concerning the applicability of policy jackets to the insurance contract. The Stage 2 trial lasted 10 weeks and the jury deliberated for 3 months before returning an incomplete verdict; the jury answered only about one-half of the interrogatories submitted it.
The trial court then certified the case for appeal pursuant to CR 54(b), setting out in detail all of the jury's findings of fact and the trial court's extensive summary judgment orders containing conclusions of law. The trial court certified the case for reasons of judicial economy, concluding, 'there must be resolution of the legal standards that will apply' before continuing with trial on the remaining 32 sites. Clerk's Papers at 050755. RAP 2.2(d). Pursuant to RAP 4.4, the Court of Appeals, Division One, transferred the case to us, and we accepted direct review.
ISSUES
1. Did Alcoa have an insurable interest in the groundwater?
2. Did Alcoa's alleged misrepresentations or failure to disclose relevant information to its insurers render the policies void ab initio?
3. Did the trial court correctly grant summary judgment to the insurers on coverage under the CGL policies' pollution exclusion provisions?
4. Did the DIC policies' suit limitation provisions apply?
5. Did the trial court correctly apply the known risk or fortuity defense to the DIC policies?
6. Under the terms of the DIC policies, should the damages be prorated among the years of damage if the environmental harm was indivisible?
ANALYSIS
We begin with the contract formation issues; we then proceed to the coverage questions; we conclude with the issues pertaining to damages.
A. Background to the Insurance Coverages
To understand the issues in this case fully, it is necessary to describe how the parties agreed to the insurance coverage provided and the nature of the coverage obtained. As befits a large, sophisticated, multinational enterprise, Alcoa had its own internal insurance or risk management department. Wishing to procure property insurance for its far- flung operations for the periods 1977-80, 1980-83, and 1983-84, Alcoa prepared 'submissions' that described the nature of Alcoa's business, its properties, and the insurance coverages Alcoa sought. Attached to the submissions were 'manuscript forms,' actual proposed insurance policies prepared by Alcoa and its insurance brokers. The manuscript forms included both CGL and DIC coverages. Large insurance brokerage firms shopped the submissions and manuscript forms to various insurers. The insurers responded with price quotations for the layers of coverage they offered to Alcoa. Upon the placement of coverage, the insurers sent 'policy jackets,' standard policy language, to the brokers for inclusion in the formal policies.
Ultimately, the first layer of CGL coverage for the period 1977-84 was placed with Commercial Union. Lexington covered the first layer of DIC coverage for 1977-80, but various other insurers provided the initial coverage for 1980-84. Numerous insurers provided excess layers of coverage.
In the mid-1980s, pressed by state and federal regulators to clean up environmental hazards on its own property and elsewhere, Alcoa incurred substantial expenses to remediate these hazards. The essence of the problem with Alcoa's insurance coverage claims here rested with the retroactive liability imposed on potentially responsible parties by CERCLA (Comprehensive Environmental Response, Compensation, and Li
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